[Federal Register Volume 84, Number 228 (Tuesday, November 26, 2019)]
[Rules and Regulations]
[Pages 65000-65007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25813]


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DEPARTMENT OF EDUCATION

34 CFR Parts 674, 682, and 685

RIN 1840-AD48
[Docket ID ED-2019-FSA-0115]


Total and Permanent Disability Discharge of Loans Under Title IV 
of the Higher Education Act

AGENCY: Office of Postsecondary Education, Department of Education.

ACTION: Interim final regulations.

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SUMMARY: The Department of Education (Department) issues these interim 
final regulations to amend and update the regulations for total and 
permanent disability student loan discharge for veterans by removing 
administrative burdens that may have prevented at least 20,000 totally 
and permanently disabled veterans from obtaining discharges of their 
student loans, as the law provides. These barriers create significant 
and unnecessary hardship for these veterans. Removing these barriers is 
a matter of pressing national concern. Although the Department 
construes its interim final rulemaking power narrowly, under these 
circumstances the Department finds

[[Page 65001]]

good cause to implement the rule immediately.

DATES: These regulations are effective July 1, 2020.
    Implementation date: For the implementation date of these 
regulatory changes, see the Implementation Date of These Regulations 
section of this document.
    We must receive your comments on or before January 27, 2020.

ADDRESSES: Submit your comments through the Federal eRulemaking Portal 
or via postal mail, commercial delivery, or hand delivery. We will not 
accept comments submitted by fax or by email or those submitted after 
the comment period. To ensure that we do not receive duplicate copies, 
please submit your comments only once. In addition, please include the 
Docket ID at the top of your comments.
    If you are submitting comments electronically, we strongly 
encourage you to submit any comments or attachments in Microsoft Word 
format. If you must submit a comment in Adobe Portable Document Format 
(PDF), we strongly encourage you to convert the PDF to print-to-PDF 
format or to use some other commonly used searchable text format. 
Please do not submit the PDF in a scanned format. Using a print-to-PDF 
format allows the Department to electronically search and copy certain 
portions of your submissions.
     Federal eRulemaking Portal: Go to www.regulations.gov to 
submit your comments electronically. Information on using 
regulations.gov, including instructions for accessing agency documents, 
submitting comments, and viewing the docket, is available on the site 
under ``Help.''
     Postal Mail, Commercial Delivery, or Hand Delivery: The 
Department strongly encourages commenters to submit their comments 
electronically. However, if you mail or deliver your comments, address 
them to Robert King, U.S. Department of Education, 400 Maryland Ave. 
SW, Washington, DC 20202.
    Privacy Note: The Department's policy is to make comments received 
from members of the public available for public viewing on the Federal 
eRulemaking Portal at www.regulations.gov. Therefore, commenters should 
include in their comments only information that they wish to make 
publicly available.

FOR FURTHER INFORMATION CONTACT: Robert King, U.S. Department of 
Education, Office of Postsecondary Education, 400 Maryland Avenue SW, 
Washington, DC 20202-2241. Telephone: (202) 453-6914. Email: 
[email protected].
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service, toll free, at 1-800-
877-8339.
    Individuals with disabilities can obtain this document in an 
accessible format (e.g., braille, large print, audiotape, or compact 
disc) on request to the contact person listed in this section.

SUPPLEMENTARY INFORMATION:
    Implementation Date of These Regulations: These regulations are 
effective on July 1, 2020. Section 482(c) of the HEA requires that 
regulations affecting programs under title IV of the HEA be published 
in final form by November 1, prior to the start of the award year (July 
1) to which they apply. However, that section also permits the 
Secretary to designate any regulation as one that an entity subject to 
the regulations may choose to implement earlier, as well as the 
conditions for early implementation.
    The Secretary is exercising her authority under section 482(c) of 
the HEA to designate the regulatory changes to parts 674, 682, and 
section 685.213 of the Code of Federal Regulations, included in this 
document, for early implementation effective immediately for the 
reasons set forth in the Summary, Background, and Need for Regulatory 
Action sections included in this document. Under this rule, eligible 
veterans who do not opt out of receiving a discharge will receive one.
    Invitation to Comment:
    Although the Secretary has decided to issue these final regulations 
without first publishing proposed regulations for public comment, we 
are interested in whether you think we should make any changes in these 
regulations. We invite your comments. We will consider these comments 
in determining whether to revise the regulations.
    To ensure that your comment has maximum effect, we urge you to 
clearly identify the specific section or sections of the proposed 
regulations that your comment addresses, and provide relevant 
information and data whenever possible, even when there is no specific 
solicitation of data and other supporting materials in the request for 
comment. We also urge you to arrange your comments in the same order as 
the regulations. Please do not submit a comment that is outside the 
scope of this notice of interim final regulations (IFR).
    We invite you to assist us in complying with the specific 
requirements of Executive Orders 12866 and 13563 and their overall 
requirement of reducing regulatory burden that might result from these 
regulations. Please let us know of any further ways we could reduce 
potential costs or increase potential benefits while preserving the 
effective and efficient administration of the Department's programs and 
activities.
    During and after the comment period, you may inspect all public 
comments about the regulations by accessing regulations.gov. You may 
also inspect the comments in person at 400 Maryland Ave. SW, 
Washington, DC, between 8:30 a.m. and 4:00 p.m., Eastern Time, Monday 
through Friday of each week except Federal holidays. To schedule a time 
to inspect comments, please contact the person listed under FOR FURTHER 
INFORMATION CONTACT.
    Assistance to Individuals with Disabilities in Reviewing the 
Rulemaking Record: On request, we will provide an appropriate 
accommodation or auxiliary aid to an individual with a disability who 
needs assistance to review the comments or other documents in the 
public rulemaking record for the regulations. To schedule an 
appointment for this type of accommodation or auxiliary aid, please 
contact the person listed under FOR FURTHER INFORMATION CONTACT.
    Background:
    Congress has authorized the discharge of student loans made 
pursuant to Title IV of the Higher Education Act of 1965, as amended 
(HEA), due to the borrower's total and permanent disability. 20 U.S.C. 
1087(a), 1087e(a)(1), and 1087dd(c)(1)(F).
    For veterans, Congress has specifically authorized total and 
permanent disability discharge if the Department of Veterans Affairs 
(VA) has determined that the veteran is unemployable due to a service-
connected disability. 20 U.S.C. 1087(a)(2), 1087e(a)(1), and 
1087dd(c)(1)(F)(iv). The Secretary has promulgated regulations 
governing the total and permanent disability discharge process for 
veterans. See 34 CFR 674.61(c), 682.402(c)(9), and 685.213(c). At the 
time these regulations were promulgated, the Department did not obtain 
information directly from the VA, and therefore required the eligible 
veteran to submit an application and supporting documentation from the 
VA to receive student loan discharge. However, in 2018 the Department 
enter into a data sharing agreement with the VA to retrieve the 
necessary information directly from the VA. As such, the application is 
an unnecessary administrative barrier, which the

[[Page 65002]]

Department believes may have prevented more than 20,000 disabled 
veterans from obtaining the student loan discharge that they are by law 
entitled to receive.
    Despite streamlining the application process, it continues to be a 
barrier that creates significant and unnecessary hardship for our 
disabled veterans. Consequently, removing these barriers is a pressing 
problem of national concern. For example, Congress directed the 
Secretary to take additional actions to automate the total and 
permanent disability discharge application process for eligible 
veterans. S. Rep. No. 115-150, at 182 (2017). The Attorneys General of 
more than 50 States and territories wrote to encourage the Department 
to remove administrative barriers so that veterans are able to receive 
loan discharge. Letter from National Association of Attorneys General 
to the Honorable Betsy DeVos, U.S. Secretary of Education (May 24, 
2019). Finally, the President has directed the Secretary to facilitate 
the discharge of student loans for totally and permanently disabled 
veterans in a manner that is quick, efficient, and minimally 
burdensome. Presidential Memorandum of August 21, 2019, Discharging the 
Federal Student Loan Debt of Totally and Permanently Disabled Veterans, 
84 FR 44677.

Significant Regulations

    The following is a discussion of the significant regulations.
    Statute: Pursuant to 20 U.S.C. 1087(a)(2), 1087e(a)(1), and 
1087dd(c)(1)(F)(iv), the Secretary is directed to discharge the loans 
under the Federal Direct Loan Program, the Federal Family Education 
Loan Program, and the Federal Perkins Loan Program of borrowers who 
have become permanently and totally disabled if the Secretary of 
Veterans Affairs has determined the borrower unemployable due to a 
service-connected condition and the borrower provides that 
documentation to the Secretary.
    Current Regulations: Under 34 CFR 674.61(c), 682.402(c)(9), and 
685.213(c), if a veteran who is also a student loan borrower is 
determined to be unemployable by the Secretary of Veterans Affairs due 
to a service-connected disability, the borrower must apply to the 
Secretary of Education for a discharge of his or her student loans. 
This application must include documentation of the Secretary of 
Veterans Affairs determination.
    New Regulations: Under 34 CFR 674.61(c)(2)(x), 682.402(c)(9)(xiii), 
and 685.213(c)(1)(v), the Secretary will consider a borrower for whom 
data is obtained from the Department of Veterans Affairs showing that 
the borrower is ``totally and permanently disabled'' to be eligible for 
discharge and will not require additional documentation to discharge 
the borrower's loans.
    Reasons: The Secretary is amending the regulations for the Federal 
Direct Loan Program, the Federal Family Education Loan Program, and the 
Federal Perkins Loan Program to remove administrative barriers for 
veterans who are entitled to student loan discharge due to a service-
related total and permanent disability.
    Due to concerns that unnecessary bureaucratic burdens prevented 
eligible veterans from obtaining loan discharges guaranteed by law, in 
2018 the Departments of Education and Veterans Affairs entered into a 
data sharing agreement to enable the Department of Education to 
identify eligible totally and permanently disabled veterans. 
Approximately 50,000 eligible veterans were identified as the result of 
this agreement. However, due to a burdensome administrative process, 
more than 20,000 eligible veterans have failed to receive relief.
    Consequently, to help veterans receive the relief to which they are 
entitled, the Secretary is amending the regulations to eliminate the 
need for a separate application from each borrower. Instead, the 
Secretary will consider a borrower to be eligible for a loan discharge 
when the Secretary has received information from the Department of 
Veterans Affairs showing that the borrower has a total and permanent 
disability. After determining that this information demonstrates the 
borrower meets statutory criteria and is eligible for a loan discharge, 
the Secretary will notify the borrower that his or her loan is being 
discharged. The borrower may reject the discharge within the number of 
days specified in the notification. In that case, the borrower will be 
liable for the full amount of the principal and interest on the loan, 
as well as any other fees and costs that may be legally assessed.

Executive Orders 12866 and 13563

Regulatory Impact Analysis
    Under Executive Order 12866, the Secretary must determine whether 
this regulatory action is ``significant'' and, therefore, subject to 
the requirements of the Executive order and subject to review by the 
Office of Management and Budget (OMB). Section 3(f) of Executive Order 
12866 defines a significant regulatory action as an action likely to 
result in a rule that may--
    (1) Have an annual effect on the economy of $100 million or more, 
or adversely affect a sector of the economy; productivity; competition; 
jobs; the environment; public health or safety; or State, local, or 
tribal governments or communities in a material way (also referred to 
as ``economically significant'' regulations);
    (2) Create serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impacts of entitlement grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles stated in the 
Executive order.
    This IFR is an economically significant action and will have an 
annual effect on the economy of more than $100 million because the 
proposed changes to an opt-out process for veterans are expected to 
increase transfers from the federal government to qualifying veterans 
by $138.7 million when annualized at a 7 percent discount rate. 
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), the 
Office of Information and Regulatory Affairs designated this rule as a 
``major rule,'' as defined by 5 U.S.C. 804(2).
    Under Executive Order 13771, for each new regulation that the 
Department proposes for notice and comment or otherwise promulgates 
that is a significant regulatory action under Executive Order 12866 and 
that imposes total costs greater than zero, it must identify two 
deregulatory actions. For FY 2019, any new incremental costs associated 
with a new regulation must be fully offset by the elimination of 
existing costs through deregulatory actions. These regulations are 
expected to reduce burden on qualifying veterans by eliminating the 
application for discharge. We estimate that this rule will generate 
approximately $0.11 million in annualized net PRA savings at a 7 
percent discount rate, discounted to a 2016 equivalent, over a 
perpetual time horizon. This regulation is a deregulatory action under 
Executive Order 13771 and therefore the requirements of Executive Order 
13771 do not apply.
    We have also reviewed these regulations under Executive Order 
13563, which supplements and explicitly reaffirms the principles, 
structures, and definitions governing regulatory review established in 
Executive Order 12866. To the extent permitted by law, Executive Order 
13563 requires that an agency--

[[Page 65003]]

    (1) Propose or adopt regulations only upon a reasoned determination 
that their benefits justify their costs (recognizing that some benefits 
and costs are difficult to quantify);
    (2) Tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives and taking into 
account, among other things, and to the extent practicable, the costs 
of cumulative regulations;
    (3) In choosing among alternative regulatory approaches, select 
those approaches that maximize net benefits (including potential 
economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity);
    (4) To the extent feasible, specify performance objectives, rather 
than the behavior or manner of compliance a regulated entity must 
adopt; and
    (5) Identify and assess available alternatives to direct 
regulation, including economic incentives--such as user fees or 
marketable permits--to encourage the desired behavior, or providing 
information that enables the public to make choices.
    Executive Order 13563 also requires an agency ``to use the best 
available techniques to quantify anticipated present and future 
benefits and costs as accurately as possible.'' The Office of 
Information and Regulatory Affairs of OMB has emphasized that these 
techniques may include ``identifying changing future compliance costs 
that might result from technological innovation or anticipated 
behavioral changes.''
    The Department has assessed the potential costs and benefits, both 
quantitative and qualitative, of this regulatory action, and we are 
issuing this IFR in response to the pressing need for, and manifest 
public interest in, deregulatory relief from bureaucratic burdens that 
have denied tens of thousands of veterans who are totally and 
permanently disabled due to service-related injuries their statutory 
right to student loan discharges. The harm caused to our veterans and 
to the public interest by the unnecessary bureaucratic burdens targeted 
for deregulatory action here is significant and widely recognized. See 
Presidential Memorandum at 44677; S. Rep. No. 115-150, at 182. Based on 
this analysis and the reasons stated in the preamble, the Department 
believes that this IFR is consistent with the principles in Executive 
Order 13563.
    We also have determined that this regulatory action does not unduly 
interfere with State, local, or Tribal governments in the exercise of 
their governmental functions.
Need for Regulatory Action
    The Higher Education Act of 1965 as amended, provides that veterans 
who are totally and permanently disabled are eligible to have their 
Federal student loans discharged. Once determined by the Secretary of 
Veterans Affairs to be totally and permanently disabled due to a 
service-connected condition, under the current regulations the veteran 
must obtain documentation of that status from the Department of 
Veterans Affairs and provide it to the Secretary of Education, along 
with an application for total and permanent disability discharge, to 
receive the discharge of a student loan. However, now that the 
Department has a data sharing agreement with the VA in place, the 
Department obtains all of the information it needs to discharge loans 
directly from the VA. This makes the application an unnecessary and 
burdensome step. Consequently, the President and Congress have asked 
the Department to ensure our veterans receive all benefits the law 
allows. Veterans would only need to contact the Department if they 
choose not to accept the discharge, in which case they would be 
responsible for full payment on the loan.
    The Department of Education has been working with the Department of 
Veterans Affairs since 2018 to facilitate a more expedited process and 
about 22,000 veterans have received approximately $650 million in 
discharges. However, thousands more have not applied for the discharge 
for which they were eligible.
    The amendments in this rule should result in a quicker, more 
efficient process and many more qualified veterans receiving the 
discharge to which they are legally entitled. Based on available data, 
this regulatory action would be significant and the initial annual 
impact on the economy would be estimated at over $100 million.
    In the past, loan discharge amounts were subject to Federal and in 
some geographies State tax, which may have dissuaded some veterans who 
could otherwise navigate the bureaucratic process from seeking a 
discharge. However, under the Tax Cuts and Jobs Act of 2017 (Pub. L. 
115-97), all Federal tax was eliminated on loan discharges of borrowers 
based on death or total and permanent disability. Some small percentage 
of these eligible veterans may opt out due to concerns over State tax 
treatment that was not affected by the 2017 Federal tax law.
    In addition, veterans who are enrolled at the time of the 
disability determination, or who plan to enroll in postsecondary 
education in the future, may opt to forego loan forgiveness so that 
they can continue to receive new Federal student loans in the future. 
Although a veteran who accepts loan forgiveness may still be able to 
borrow in the future, the Department requires such a borrower to obtain 
a certification from a physician that the borrower is able to engage in 
substantial gainful employment and must sign a statement acknowledging 
that neither the new Direct Loan the borrower receives cannot be 
discharge in the future on the basis of any impairment present when the 
new loan is made, unless that impairment substantially deteriorates. 
Some veterans may elect to simply forego loan forgiveness to preserve 
future borrowing opportunities or the need to obtain medical 
certification.
    Nevertheless, this new deregulatory approach should remove 
unnecessary bureaucratic barriers and allow many more qualified 
veterans to receive the discharge to which they are entitled.
Costs, Benefits and Transfers
    The primary parties affected by these regulations will be the 
veterans who qualify for the discharge and the taxpayers, through the 
transfers from the Federal Government to the qualifying veterans. 
Qualifying veterans and their families will be relieved of a financial 
burden related to Federal student loans, including the stress 
associated with repayment or potential defaults and collections. The 
Department of Veteran's Affairs estimates that approximately 150,000 
veterans a year will reach a qualifying disability rating over the next 
ten years, of which approximately 18 percent will be 50 years old or 
under and around 20 percent will have at least some postsecondary 
education at the time of their separation from the armed services. Many 
more likely use education benefits and loans to pursue postsecondary 
credentials after separation. Therefore, it makes sense that thousands 
of current and future veterans will benefit from the change to the opt-
out approach.
    As described in the Paperwork Reduction Act section of this 
preamble, the elimination of the application will reduce the burden on 
veterans who qualify for the discharge. The elimination of the 
application is a reduction in burden of [5,000] hours and $140,900 
calculated at a wage rate of $28.18.\1\
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    \1\ Bureau of Labor Statistics, Economic News Release Table B-3. 
Average hourly and weekly earnings of all employees on private 
nonfarm payrolls by industry sector, seasonally adjusted. Applying 
average hourly wage rate for October 2019 for total private 
industry. Available at https://www.bls.gov/news.release/empsit.t19.htm.

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[[Page 65004]]

    The increase in transfers will affect taxpayers, through the 
Federal government, as more veterans receive the loan discharge for 
which they qualify. This effect is described in the Net Budget Impacts 
section of this preamble. Estimated annualized transfers are $138.7 
million at a 7 percent discount rate.
Net Budget Impact
    We estimate that these final regulations will have a net Federal 
budget impact over the 2020-2029 loan cohorts of $787 million in 
outlays and a modification to past cohorts of $543.8 million, for a 
total net impact of $1.3 billion. A cohort reflects all loans 
originated in a given fiscal year. Consistent with the requirements of 
the Credit Reform Act of 1990, budget cost estimates for the student 
loan programs reflect the estimated net present value of all future 
non-administrative Federal costs associated with a cohort of loans. The 
Net Budget Impact is compared to the 2020 President's Budget baseline, 
as estimated for Mid-Session Review (PB2020).
    As discussed throughout this preamble, these regulations will make 
the discharge process of loans for veterans with a service-related 
disability an opt-out process instead of the opt-in process associated 
with the current match between the Department and the Department of 
Veterans Affairs. While the existing match has been processed since 
2018 and the Department has accepted Department of Veterans' Affairs 
determinations of disability status without additional medical 
information since 2013, a significant percentage of veterans who would 
qualify for the discharge do not submit applications. Of approximately 
58,000 likely qualifying veterans identified in the match process, only 
about 22,000 veterans have received approximately $650 million in 
discharges. According to Federal Student Aid, approximately 4,000 
additional veterans are identified in each quarterly match.
    To estimate the effect of the opt-out procedure, the Department 
adjusted the disability component of its Death, Disability, and 
Bankruptcy assumption (DDB), which also includes closed school and 
borrower defense discharges that have been the subject of recent 
regulations. To calculate the effect on past cohorts from borrowers 
currently eligible for the discharge who have no record of receiving 
one, the Department summarized the balances, collections, and payments 
associated with veterans identified in the August 2018 match who had 
not received a disability or death discharge by the end of FY 2019. 
These potential claims were grouped by population identification (non-
consolidated, consolidated not-from-default, and consolidated from 
default), and offset between the fiscal year of loan origination and 
fiscal year of disability. Baseline disability claims were also 
summarized by these factors and an adjustment factor for the increase 
represented by the potential claims was calculated. For example, for 
the 2010 cohort for consolidated loans, potential claims were 
approximately 5 percent of baseline disability claims, so the 
adjustment factor was 1.05 percent.
    This adjustment accounts for the potential increase in claims from 
former borrowers with an existing qualifying disability rating. The 
change to the opt-out approach will increase the level of disability 
discharges going forward, but not to the same degree as the significant 
adjustment in FY2020 that captures the build-up of years from those who 
did not submit applications. To estimate the adjustment for future 
claims, the Department focused on those newly identified as disabled in 
2018 and calculated an adjustment factor based on those who received a 
discharge versus those potential discharges who were in the match but 
did not submit applications. This adjustment was applied to future 
cohorts and future disability determinations for borrowers in past 
cohorts.
    The Department incorporated this increase into the DDB assumption 
estimated for PB2020 and this generated the $1.3 billion in costs 
associated with the regulations.
    A number of factors may affect the estimated cost of these 
regulations. Some borrowers may have lacked awareness of the potential 
discharge or found the application process difficult. To the extent 
existing borrowers choose to not apply for tax reasons, the tax 
provision granting that relief is currently scheduled to expire on 
December 31, 2025. While it may be renewed, the opt-out rate for future 
discharges occurring in 2026 and later could increase. In estimating 
the net budget impact of these interim final regulations, the 
Department reduced the adjustment factor for 2026 and later by 15 
percent to account for this. If that provision is extended or if more 
of the unfiled applications were for process reasons and did not 
reflect deliberate tax planning, the opt-out rate may decrease and the 
costs could go up.
    Another issue is the assumption that the non-applicants and future 
qualifying veterans will have a similar profile to applicants in terms 
of the amount of loans, repayment profiles, and the timing of their 
qualifying disability. It is possible that those who applied for a 
discharge as the result of the match had higher balances and thus more 
incentive to file, especially once the federal tax consequences were 
removed. Applicants and non-applicants could vary by debt level, 
educational attainment, nature of their disability, availability of 
support or other factors that could result in the discharges granted 
through the opt-out provision having a different average amount or 
subsidy cost for the Department.
    Another challenge is predicting the effect on future loan cohorts. 
We assume the level and timing of service-related disabilities will 
remain similar to that for existing borrowers. Clearly, geopolitical 
factors that the Department of Education does not predict could affect 
the number of veterans who qualify for the discharge. Additionally, 
student loan borrowing among those who may serve in the military and 
eventually qualify for a discharge could increase depending upon 
recruitment patterns and further education pursued by those serving in 
the military. However, it is possible that the relatively generous 
provisions of the Post 9/11 GI bill will reduce borrowing by more 
recent and future cohorts of veterans relative to past cohorts. An 
analysis done by Veterans Education Success of National Postsecondary 
Student Aid Survey data for the most recent three survey cycles 
(NPSAS:08, NPSAS:12 and NPSAS:16) indicated that the percentage of 
veterans borrowing at proprietary schools decreased from 78 percent in 
NPSAS:08 to 42 percent in NPSAS:16 and the average annual amount 
borrowed decreased slightly from $8,680 to $8,630 in 2015 dollars.\2\ 
The percent of veterans borrowing declined slightly in other sectors 
(38 percent to 32 percent for public 4-year institutions) and the 
average amounts borrowed also declined ($10,410 for 4-year private non-
profit in NPSAS:08 to $8,980 in NPSAS:16).\3\
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    \2\ Walter Ochinko and Kathy Payea, Veterans Education Success, 
Veteran Student Loan Debt: Data from NPSAS:08,12,16, January 2019, 
Figure 1, p.4. Available at https://vetsedsuccess.org/veteran-student-loan-debt-7-years-after-implementation-of-the-post-9-11-gi-bill/.
    \3\ Id.
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    Medical or technical advances that affect the classification of 
disability could potentially be a factor reducing the estimated costs 
associated with

[[Page 65005]]

future loan cohorts. For estimation purposes, we assume future cohorts 
will look like existing cohorts but acknowledge that a number of 
factors could shift the estimated costs in either direction.

Accounting Statement

    As required by OMB Circular A-4 (available at www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a004/a-4.pdf), in the 
following table we have prepared an accounting statement showing the 
classification of the expenditures associated with the provisions of 
these final regulations. This table provides our best estimate of the 
changes in annual monetized transfers as a result of these final 
regulations. Expenditures are classified as transfers from the Federal 
Government to veterans who qualify for a total and permanent disability 
discharge.\4\
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    \4\ An indirect cost of the interim final rule is the increased 
distortions in the nationwide labor market and other markets taxed 
to pay for the loan discharge program. Such distortions are 
sometimes referred to as marginal excess tax burden (METB), and 
Circular A-94--OMB's guidance on cost-benefit analysis of federal 
programs, available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A94/a094.pdf--suggests that METB 
may be valued at roughly 25 percent of the estimated transfer 
attributed to a policy change; the Circular goes on to direct the 
inclusion of estimated METB change in supplementary analyses. If 
secondary costs--such as increased marginal excess tax burden is, in 
the case of this IFR--are included in regulatory impact analyses, 
then secondary benefits must be as well, in order to avoid 
inappropriately skewing the net benefits results, and including METB 
only in supplementary analyses provides some acknowledgement of this 
potential imbalance.

 Table 6--Accounting Statement: Classification of Estimated Expenditures
                              [in millions]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                Category                             Benefits
------------------------------------------------------------------------
Increased share of qualifying veterans
 who receive a total and permanent
 disability discharge...................          Not Quantified
------------------------------------------------------------------------
                                                  Not Quantified
------------------------------------------------------------------------
Reduced paperwork burden on Veterans who              7%              3%
 qualify for a TPD discharge............          $-.141         $$-.141
------------------------------------------------------------------------
                Category                             Transfers
------------------------------------------------------------------------
Increased loan discharges for veterans                7%              3%
 with a qualifying total and permanent            $138.7          $130.2
 disability status......................
------------------------------------------------------------------------

Waiver of Notice and Comment Rulemaking, Negotiated Rulemaking, and 
Delayed Effective Date Under the Administrative Procedure Act

    The Department believes its interim final rulemaking authority must 
be narrowly construed and exercised only when there is a sound basis 
for doing so. However, Congress has directed the Department to remove 
unnecessary bureaucratic barriers that constructively deny lawful 
benefits to veterans who are totally and permanently disabled because 
of service-connected injuries and has left the Department no discretion 
in the matter. Consequently, given the uniquely specific facts of this 
case, the critical public need for the Federal Government to support 
disabled veterans, and the nature of this deregulatory action, the 
Department has determined that there is good cause for interim final 
rulemaking and that such action is in the public interest.
    Under the Administrative Procedure Act (APA) (5 U.S.C. 553), the 
Department generally offers interested parties the opportunity to 
comment on proposed regulations. However, the APA provides that an 
agency is not required to conduct notice and comment rulemaking when 
the agency, for good cause, finds that notice and public comment 
thereon are impracticable, unnecessary, or contrary to the public 
interest (5 U.S.C. 553(b)(B)).
    Section 437(a)(2) of the HEA provides that ``[a] borrower who has 
been determined by the Secretary of Veterans Affairs to be unemployable 
due to a service-connected condition and who provides documentation of 
such determination to the Secretary of Education, shall be considered 
permanently and totally disabled for the purpose of discharging such 
borrower's loans under this subsection, and such borrower shall not be 
required to present additional documentation for purposes of this 
subsection.'' (emphasis added). The Senate Appropriations Committee 
Report (S. Rep. No. 115-150, at 182 (2017)) directed ``the Secretary of 
Education to enter into a Memorandum of Understanding with the 
Secretaries of Defense and Veterans Affairs to automate the application 
of loan benefits to eligible servicemembers and veterans using 
information in existing Federal databases in a timely manner so that 
servicemembers and veterans can receive the benefits due under law.'' 
To effectuate this automation, the Departments of Education and 
Veterans Affairs entered into a data sharing agreement to enable the 
Department of Education to identify eligible totally and permanently 
disabled veterans. As this automation through the data sharing 
agreement will fulfill the statutory requirement of providing 
documentation from the Secretary of Veterans Affairs of a borrower's 
unemployability due to a service-connected condition, borrowers will 
not be required to submit additional documentation to the Secretary. As 
a result of this automated process and the requirements of section 
437(a)(2), which specifically states no additional documentation is to 
be required, there will no longer be a need for, nor will the 
Department have the discretion to require, a separate application from 
identified borrowers. We are revising the regulations accordingly.
    As the Court found in Metzenbaum v. Federal Energy Regulatory 
Commission, 675 F.2d 1282, 1291 (D.C. Cir. 1982), the opportunity for 
notice and comment where there is no discretion is ``unnecessary.'' Id. 
(quoting 5 U.S.C. 553(b)(B)). The Court further stated that notice and 
comment for such a nondiscretionary action ``might even have been 
`contrary to the public interest,' given the expense that would have 
been involved in a futile gesture.'' Id. See also Lake Carriers' Ass'n 
v. E.P.A., 652 F.3d 1, 10 (D.C. Cir. 2011) (notice and comment 
rulemaking ``would have served no purpose'' where EPA lacked the 
authority to amend or

[[Page 65006]]

reject the conditions at issue). Therefore, there is good cause to 
waive notice and comment rulemaking for these interim final 
regulations.
    In addition, under section 492 of the HEA (20 U.S.C. 1098a), all 
regulations proposed by the Department for programs authorized under 
title IV of the HEA are subject to negotiated rulemaking requirements. 
Section 492(b)(2) of the HEA provides that negotiated rulemaking may be 
waived for good cause when doing so would be ``impracticable, 
unnecessary, or contrary to the public interest.'' Section 492(b)(2) of 
the HEA also requires the Secretary to publish the basis for waiving 
negotiations in the Federal Register at the same time as the 
regulations in question are first published. There is likewise good 
cause to waive the negotiated rulemaking requirement in this case, 
since, as explained above, notice and comment rulemaking is unnecessary 
in this case.
    The APA also generally requires that regulations be published at 
least 30 days before their effective date, but excepts from that 
requirement rules which grant or recognize an exemption or relieve a 
restriction (5 U.S.C. 553(d)(1)). Because these regulations relieve 
restrictions on veterans by removing unintended administrative burdens, 
this exception to the delayed effective date under the APA applies. The 
CRA requires a major rule may take effect no sooner than 60 calendar 
days after an agency submits a CRA report to Congress or the rule is 
published in the Federal Register, whichever is later. 5 U.S.C. 
801(a)(3)(A). However, the CRA creates limited exceptions to this 
requirement. See id. Sec.  801(c); Sec.  808. An agency may invoke the 
``good cause'' exception under Sec.  808(2) in the case of rules for 
which the agency has found ``good cause'' under the APA, Sec.  
553(b)(3)(B), to issue the rule without providing the public with an 
advance opportunity to comment. As stated above the Department has 
found good cause to issue this rule without notice and comment 
rulemaking and thus we are not including the 60-day delayed effective 
date in this rule.

Regulatory Flexibility Act Certification

    The Secretary certifies that these regulations will not have a 
significant economic impact on a substantial number of small entities. 
The U.S. Small Business Administration Size Standards define ``small 
entities'' as for-profit or nonprofit institutions with total annual 
revenue below $7,000,000 or, if they are institutions controlled by 
small governmental jurisdictions (that are comprised of cities, 
counties, towns, townships, villages, school districts, or special 
districts), with a population of less than 50,000.
    This regulation would not affect any small entities. Small entities 
do not qualify as borrowers under these Federal loan programs, nor do 
small entities provide or fund Federal loans or their discharge.

Paperwork Reduction Act of 1995

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department provides the general public and Federal agencies 
with an opportunity to comment on proposed and continuing collections 
of information in accordance with the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: The public 
understands the Department's collection instructions, respondents 
provide the requested data in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the Department can properly assess the impact 
of collection requirements on respondents.
    Sections 674.61, 682.402, and 685.213 of this interim final rule 
contain information collection requirements. Under the PRA, the 
Department has submitted a copy of these sections and an Information 
Collections Request to the Office of Management and Budget (OMB) for 
its review. This interim final rule does not impose any new information 
collection burden. OMB previously approved the information collection 
requirements under OMB control number 1845-0065. The forms that are 
part of this information collection do not change as a result of this 
interim final rule.
    A Federal agency may not conduct or sponsor a collection of 
information unless OMB approves the collection under the PRA and the 
corresponding information collection instrument displays a currently 
valid OMB control number. Notwithstanding any other provision of the 
law, no person is required to comply with, or is subject to penalty for 
failure to comply with, a collection of information if the collection 
instrument does not display a currently valid OMB control number.

Sections 674.61(c), 682.402(c)(9), and 685.213(c)

    Discussion: Currently the regulations pertain to a veteran's 
cancellation or discharge of a Federal Perkins Loan Program, Federal 
Family Education Loan Program, or Federal Direct Loan Program loan 
based on total and permanent disability as certified by the U.S. 
Department of Veterans Affairs (VA). This information has been 
collected under OMB approved form control number 1845-0065. The current 
regulations required a veteran to submit a separate application with 
documentation from the VA. These regulatory changes eliminate the 
application requirement where appropriate.
    Requirements: These changes allow the Secretary to offer a Federal 
student loan borrower who is identified from VA documentation as being 
totally and permanently disabled a discharge of his or her loans 
without submitting a separate application. The veteran may elect to 
reject the discharge and continue to repay the loans.
    Burden Calculation: These changes eliminate burden on the veteran. 
The currently approved form, 1845-0065, estimates 30 minutes (.50 
hours) to read, gather documentation, and complete the discharge 
application. We estimate that annually approximately 10,000 veterans 
would have submitted the application for discharge due to total 
permanent disability. This regulatory change reduces the burden 
assessed on the approved form by 5,000 hours (10,000 applicants x .50 
hours = 5,000 hours). This would be a one-time reduction in burden. We 
do not anticipate changing the Discharge Application currently in 
renewal to remove the section applicable to a veteran's request for 
such a discharge.

                         1845-0065 Discharge Application--Total and Permanent Disability
----------------------------------------------------------------------------------------------------------------
                                                 Number of        Number of        Burden per      Total burden
                   Entity                       respondents       responses         response          hours
----------------------------------------------------------------------------------------------------------------
Individual (Veteran)........................         -10,000          -10,000        .50 hours           -5,000
----------------------------------------------------------------------------------------------------------------


[[Page 65007]]

    We consider your comments on these proposed collections of 
information in--
     Deciding whether the proposed collections are necessary 
for the proper performance of our functions, including whether the 
information will have a practical use;
     Evaluating the accuracy of our estimate of burden of the 
proposed collections, including the validity of our methodology and 
assumptions;
     Enhancing the quality, usefulness, and clarity of the 
information we collect; and
     Minimizing the burden on those who must respond. This 
includes exploring the use of appropriate automated, electronic, 
mechanical, or other technological collection techniques.
    OMB is required to make a decision concerning the collection of 
information contained in this interim final rule between 30 and 60 days 
after publication of this document in the Federal Register. Therefore, 
to ensure that OMB gives your comments full consideration, it is 
important that OMB receives your comments by December 26, 2019.

Intergovernmental Review

    This program is not subject to Executive Order 12372 and the 
regulations in 34 CFR part 79.

Assessment of Educational Impact

    Based on our own review, we have determined that this IFR does not 
require transmission of information that any other agency or authority 
of the United States gathers or makes available.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
Federal Regulations at www.govinfo.gov. At this site you can view this 
document, as well as all other documents of this Department published 
in the Federal Register, in text or PDF. To use PDF you must have Adobe 
Acrobat Reader, which is available free at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

List of Subjects

34 CFR Part 674

    Loan programs-education, Reporting and recordkeeping, Student aid.

34 CFR Part 682

    Administrative practice and procedure, Colleges and Universities, 
Loan programs-education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

34 CFR Part 685

    Administrative practice and procedure, Colleges and Universities, 
Loan programs-education, Reporting and recordkeeping requirements, 
Student aid, Vocational education.

    Dated: November 22, 2019.
Betsy DeVos,
Secretary of Education.

    For the reasons discussed in the preamble, the Secretary amends 
parts 674, 682, and 685 of title 34 of the Code of Federal Regulations 
as follows:

PART 674--FEDERAL PERKINS LOAN PROGRAM

0
1. The authority citation for part 674 continues to read as follows:

    Authority: 20 U.S.C. 1070g, 1087aa-1087hh; Pub. L. 111-256, 124 
Stat. 2643; unless otherwise noted.


0
2. Section 674.61 is amended by adding paragraph (c)(2)(x) to read as 
follows:


Sec.  674.61  Discharge for death or disability.

* * * * *
    (c) * * *
    (2) * * *
    (x) The Secretary will consider a borrower for whom data is 
obtained from the Department of Veterans Affairs showing that the 
borrower has a total and permanent disability as defined in Sec.  
674.51(aa)(2) to be eligible for discharge and will not require 
additional documentation to discharge the borrower's loans.
* * * * *

PART 682--FEDERAL FAMILY EDUCATION LOAN PROGRAM (FFEL)

0
3. The authority citation for part 682 continues to read as follows:

    Authority: 20 U.S.C. 1071-1087-4, unless otherwise noted.


0
4. Section 682.402 is amended by adding paragraph (c)(9)(xiii) to read 
as follows:


Sec.  682.402  Death, disability, closed school, false certification, 
unpaid refunds, and bankruptcy payments.

* * * * *
    (c) * * *
    (9) * * *
    (xiii) The Secretary will consider a borrower for whom data is 
obtained from the Department of Veterans Affairs showing that the 
borrower is ``totally and permanently disabled'' as defined in 
paragraph (2) of the definition of that term in Sec.  682.200(b)(2) to 
be eligible for discharge) and will not require additional 
documentation to discharge the borrower's loans.
* * * * *

PART 685--WILLIAM D. FORD FEDERAL DIRECT LOAN PROGRAM

0
5. The authority citation for part 685 continues to read as follows:

    Authority: 20 U.S.C 1070g, 1087a, et seq., unless otherwise 
noted.


0
6. Section 685.213 is amended by adding paragraph (c)(1)(v) to read as 
follows:


Sec.  685.213  Total and permanent disability discharge.

* * * * *
    (c) * * *
    (1) * * *
    (v) The Secretary will consider a borrower for whom data is 
obtained from the Department of Veterans Affairs showing that the 
borrower is ``totally and permanently disabled'' as defined in 
paragraph (2) of the definition of that term in Sec.  685.102(b) to be 
eligible for discharge and will not require additional documentation to 
discharge the borrower's loans.
* * * * *
[FR Doc. 2019-25813 Filed 11-22-19; 4:15 pm]
BILLING CODE 4000-01-P